Correlation Between Colgate Palmolive and CHS
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and CHS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Colgate Palmolive and CHS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and CHS Inc Pref, you can compare the effects of market volatilities on Colgate Palmolive and CHS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Colgate Palmolive with a short position of CHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and CHS.
Diversification Opportunities for Colgate Palmolive and CHS
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Colgate and CHS is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and CHS Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc Pref and Colgate Palmolive is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Colgate Palmolive are associated (or correlated) with CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc Pref has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and CHS go up and down completely randomly.
Pair Corralation between Colgate Palmolive and CHS
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to under-perform the CHS. In addition to that, Colgate Palmolive is 2.0 times more volatile than CHS Inc Pref. It trades about -0.01 of its total potential returns per unit of risk. CHS Inc Pref is currently generating about 0.03 per unit of volatility. If you would invest 2,683 in CHS Inc Pref on August 27, 2024 and sell it today you would earn a total of 11.00 from holding CHS Inc Pref or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. CHS Inc Pref
Performance |
| Timeline |
| Colgate Palmolive |
| CHS Inc Pref |
Colgate Palmolive and CHS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and CHS
The main advantage of trading using opposite Colgate Palmolive and CHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, CHS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CHS will offset losses from the drop in CHS's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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